Macro Theme:

Key dates ahead:

Founder’s Note:

Futures are flat with GDP out at 8:30AM ET.

TLDR: We continue to look for positive drift in the SPX, which is up ~2% since OPEX. Another 1-1.5% move places the SPX just under the 7k JPM strike, which would likely be a topping point. To the downside our Risk Pivot remains at 6,800, but we note that there is no material positive gamma < 6,850, and vols are smooshed to their minima. We don’t think that 2 days before Xmas is when violent selling would start, but we will be on watch for downside starting next week.

The only thing that is a likely driver today is Captain Condor, who is in with a massive 47k 0DTE position at 6,900/6,905 x 6,855, 6,850. This sets today up to be a “Seek & Destroy” mission, implying that the SPX needs to touch one side that condor. Accordingly, these levels are the big support and resistance for the day. If this trade loses today, Captain has to double down to nearly 100k for tomorrow – the shortened, Xmas Eve session. That would be a fascinating development… and one has to wonder how much Captain and his band of Condors has – can they double from 50k to 100k contracts?

Moving on, we yesterday touched on the move to crush vol into Xmas, and today we see mark the VIX touching 1-year lows of 14.05.Further we see short-dated IV’s in the mid 7’s, which is a clear sign of “maximum crush”. While there isn’t much juice left to squeeze in vol this week, its does set up for vol expansion post-Xmas and into New Years.

Lastly, on single stocks, most are now back to call weighted skews (bottom right of Compass). We note that this is not yet extreme, but it does suggest looking for upside over the next few sessions. In other words, this looks good for the “Santa Rally”, and if it was to move to more of an extreme call weighting, it could be the third leg of a nice short setup for post-Xmas (negative gamma, smashed SPX IV, overweight equity call skews).

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